Climbing the manufacturing value chain
China already ranks fourth in the world in terms of manufacturing ability, according to the China Manufacturing Index published by the Chinese Academy of Engineering (CAE), and I’m confident it won’t be long before it moves further up the rankings. Once k
While its journey has not been easy, China has been steadily bridging the gap between itself and the global frontrunners – the US, Germany and Japan. China’s share of the world’s high-tech production was 9 per cent in 2000, but had risen to 44 per cent by 2014. Also in 2014, China’s State Council unveiled “Made in China 2025”, a 10-year plan aimed at developing the country into a powerhouse of high-end manufacturing. China aims to match Japan and Germany’s manufacturing standards in the next nine years. These countries are global leaders because of the sophistication and efficiency of their production techniques, something that China is wise to emulate.
The country’s latest national five-year plan or Shisanwu was announced in late 2015 with a cornerstone goal of building a “moderately prosperous society” in China. The two plans, while ambitious, will help China shift from export dependence to a more consumer-led economy.
In addition to a greater emphasis on services and consumption, China is focusing on innovation, including the Internet of Things – which features prominently in Shinsanwu – and aviation. The government’s expansionist One Belt, One Road initiative is also encouraging China’s companies to connect to the world.
An acceleration in research and development on robotics and artificial intelligence is another positive trend. For example, Kunshan, in China’s Jiangsu province, is one of the country’s major manufacturing hubs seeking to reinvent itself after the devastating impact of the industrial city’s dust explosion two years ago.
And it’s not just Chinese firms spending big – according to Kunshan’s government, 35 major Taiwanese companies, including Apple supplier Foxconn, spent a combined 4 billion renminbi (Bt21.1 billion) on robotics and artificial intelligence last year, and this figure will only increase.
Another example of China’s progression up the manufacturing value chain is its entry into building passenger jets. The recent maiden flight of China’s first regional aircraft, the ARJ-21, follows the launch of the C919 jet last year.
These aviation developments signal an important shift in Chinese manufacturing, but also highlight that key industrial techniques are still monopolised by the West. While these aircraft were made in China, they still relied heavily on foreign component parts: the engines were made by CFM International, while France’s Safran and Honeywell from the US supplied the flight control, wheels, auxiliary power, and navigation.
China’s aviation industry currently relies on the high-end manufacturing prowess of Western nations because it is still in a fledgling state, but I am confident it will be only a matter of time before China becomes a stand-alone aviation manufacturer.
Overall, China’s steady progression up the manufacturing value chain is an impressive story of economic transformation. Innovation will continue to be crucial to this success and China’s chances of achieving its ambitious goal of surpassing its closest manufacturing competitors.
